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Does IoT Need Service Providers?

- February 14, 2017 - 2 Comments

As part of my current series introducing concepts from my book, Building the Internet of Things here is a short excerpt from the book:

I remember a few years ago when we at Cisco decided to embrace and drive this new phenomenon of everything being connected, we had a fierce debate whether to call this trend Internet of Things (IoT) or Machine to Machine (M2M). Service providers (SPs) had been focusing on M2M for a few years by then. One SP told me at that time that they were shocked to discover that one-third of subscribers on their 3G network were M2M devices. According to Steve Hilton, president of MachNation, an analyst firm specializing in IoT and digitization research, “It was at this point that service providers realized there was a bigger opportunity in store for them and started paying conscious attention to these new types of connections.”

SPs have a significant role in smart cities and connected transportation.

Mobile operators got an early start in M2M with connecting cars and early IoT solutions as mundane as optimizing pizza delivery. Their challenge turned out to be less about technology and more about the business model. Operators built their mobile businesses based on a relatively high average revenue per user (ARPU) that smartphones delivered. Thus, they were looking for IoT solutions that could deliver similar ARPU. Unfortunately, most of the M2M services such as remote monitoring and maintenance delivered a monthly dollar ARPU in single digits. There was also a question of credibility with enterprises. I heard from many enterprise customers that SPs were just “providers of pipes” and could not be trusted with enterprise SLAs and complex solutions.

But since then, SPs have evolved: Some chose to invest in internal capabilities to develop vertical expertise and IoT services; some created ecosystems of partnerships; some attempted to buy their way into telematics capabilities and IoT platforms; some considered operating dedicated IoT networks using older generation mobile technologies; many created dedicated divisions (separate from their wireline and wireless operations) focused on M2M, vertical IoT solutions and managed services, with some becoming $1B+ businesses. Several mobile virtual network operators (wireless services providers that do not own the underlying network infrastructure), either independent or divisions of larger operators, started to offer vertical and horizontal IoT services as well. “In order to take advantage of the opportunities in the market, SPs focused on changing five key areas of their businesses: organizational redesign, partnership development, technology portfolio enhancement, network development, and market messaging,” said Hilton.

Today, most major SPs have a strategic focus on IoT. They are in the process of sorting through a plethora of Low-Power Wide-Area Network technologies and are in the early stages of pursuing 5G definitions with IoT use cases in mind. They have developed and matured vertical businesses and IoT business models going beyond connectivity. For example, they are pursuing several distinct profit pools in the connected vehicle domain, each with an additional ARPU. These efforts include the four categories of IoT solutions I have identified as fast paths to IoT payback. Almost every week, we see an announcement of an IoT partnership between an SP and an enterprise. As the smartphone market becomes saturated in the United States and Europe, connected cars and connected things have become a bright spot and a high-growth area for the operators. Many of these services now deliver a relatively high ARPU through the combination of connectivity and managed services.

So yes, SPs, after a few years of trial and error and some failed attempts and early starts, are playing a key role in the IoT ecosystem; many of them are worthy of your consideration as well.

In two weeks, I’ll wrap up this series on IoT with an overview of where we are in our collective IoT journey.

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2 Comments

    Mitch, I am so thrilled that you found the book realistic and practical. As you said, the best way to ensure success in our IoT journeys is to learn from each other's experiences (positive and negative). It was very nice to meet you at the IoT Evolution event. Thank you again for your comments and let's continue to exchange best practices. //mk

  1. Good Afternoon Maciej, Truly enlightening! That is how I would describe your book, Building the Internet of Things, to anyone interested in learning more about the IoT. What I found most fascinating was how you used real-life case-studies as a way to explain the real benefits of IoT for someone exploring the changeover for their organization. I remember how we began our IoT Journey when we first invested in digital printing and mailing equipment around 7 years ago. Each implementation step was a major hurdle, particularly 5 years ago when we began internally developing data-driven cross-channel marketing campaigns on our own, using software designed to power our these kind of campaigns. Our organizational culture, systems and processes had to dramatically change; and the challenge we had getting the entire team on-board and trained was a very arduous process. Believe it or not, it took us almost an entire year getting our first marketing campaign out the door. However, the transformation of that business unit is now really paying off. What is very interesting to me and our team is our competitors that did not make the digital changeover have disappeared; which made this whole painful process worth the effort. Today, we are integrating our clients' mailing service results, Internet marketing campaigns and our lead-tracking systems with our clients cloud-based systems; providing them with automated reporting dashboards that show ROI by marketing channel in real-time, unlike anything we were ever able to accomplish. It is amazing how quickly everything is evolving. So Maciej, our IoT journey is very similar to how you described it in your book. And the payoff is exactly as you wrote. And I am sure, based on everything I am reading and seeing that the best is yet to come. Good luck with your book sales. I have already begun referring it to friends.

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